ASIA CAPITAL PLC (ACAP.N000) Rays of Resilience... Asia Capital PLC (ACAP.N0000) is an investment bank engaged in both fund and fee based activities for more than 30 years. Fee based activities include corporate fi nance, assets management, investment advisory, business consultancy and other capital market activities. Major Investments are in the leisure and real estate sector in collaboration with Japanese & Malaysian investors. www.asiacapital.lk Market Price (MP) : LKR 7.00 Net Asset Value (NAV) : LKR 18.50 NET ASSET VALUE Net Asset Value @Q2x2020 LKR 1,087 mn Revaluations (Page-2) LKR 325 mn Divestments ( Page-3) LKR 1,133 mn Less: Loss for 2Hx2020 LKR 90 mn NET ASSET VALUE LKR 2,455 mn ACAP share price movement during 12 months Issued Shares: 131 .32 m n Net Assets per share: LKR 18.6 9 Majority shareholdings of Asia Capital PLC is held by Dato Vijayeshwaran a Malaysian business magnate who over 71.61% shareholdings. Japanese investors Yoshimichi and Eiji Watanabe who owns 16.24% of shareholdings of the company have unconventionally demanded the majority shareholders to repurchase their shareholdings at the original investment value. This controversy caused the majority shareholders to embark on a corporate restructuring and diversi fi cation process to turnaround the company. Source: Quarterly Accounts 2Q2020 Source: Annual Report 2020 SRI LANKA Total Assets of the Asia Capital PLC as at end of 2Q 2020 amounted to LKR 3,666mn whilst group assets exceeded LKR 4,72 5mn. Assets per share of the company prior to revaluation is LKR 27.92 whereas the for the group is LKR 35.98 ACAP Investments in subsidiaries and associated companies as at 30th September 2020 amounted to LKR 1,130mn and LKR 398mn respectively . Asia Leisure Holding s Among the list of investments as given in Table-II Asia Leisure Holdings (private) Limited (ALH) remain to be the largest investment made in subsidiary companies. ACAP currently owns 73% of Asia Leisure (private) Limited (ALH) valued at LKR 730mn. ALH is expected to be listed in the Colombo Stock Exchange in 2021 by way of introduction. Asia Leisure Holdings investment value to enhance upon listin g As per audited fi nancial statement of ALH given in the Table III, the Net Asset Value (NAV) of ALH as at 31st March 2019 amounted to LKR 893 mn and gross asset value amounted to LKR 1,666mn Fair market value of ALH determined on the basis of 1.5xNAV is expected to increase the total value of the investment subsidiary companies by LKR 325 m n Source: Annual Report 2020 (table II) Source: Quarterly Accounts 2Q2020 (table 1) Investment in subsidiaries to mature in 2021 Source: Annual Accounts 2019 (table III) Page 2 Asia Capital PLC together with its partner Belluna Group of Japan, have collaborated in multiple projects in Sri Lanka under joint venture partnership whereby company entitled to a share of pro fi ts and equity 447 Luna Tower is one such joint venture for development of 44 fl oor storey apartment tower located in Union Place Sri Lanka. Project expected to be completed in May 2021. Asia Capital PLC expected to derive LKR 277mn consideration upon divestment/settlement of 10% pro fi t/equity share for the investment. (Note-1) Marine Square, a project consist of 297 hotel room in joint venture agreement with Belluna Group Japan expected to yield LKR 244mn to Asia Capital PLC upon settlement and divestment of 8% equity/pro fi t share for the investment. (Note-2 ) Asia Capital PLC together with Balluna group has successfully completed a 70 room luxury property on the island of Miriandhoo, located in the silk sanded coral Baa Atol Maldives. Marriott International together with Westin Hotels & Resorts in the Republic of Maldives manages. The Westin Maldives Miriandhoo Resort since October 2018.. Asia Capital PLC owned 8% shareholding in Miriandhoo expected to be divested for LKR 462mn. (Note-3) Similarly the Asia Capital PLC jointed partnership with Belluna Group in respect of Le Grand Galle 50 room hotel located in Galle is expected to yield LKR 150mn upon divestment Divestment of respective equity share held by Asia Capital PLC in multiple joint venture with Balluna Group Japan is expected to yield upto LKR 1.133mn in 2021. These investments are not shown in the fi nancial statements due to the accounting standard adopted by the auditors of the company. 447 Luna Tower Set in the heart of the city of Colombo, 447 Luna Tower will transform the landscape of Union Place. Constructed on prime real estate, the tower stands 44 floors tall and consists of 194 upscale apartments. Scheduled Completion Q2 2021 Marine Drive Located at the centre of Colombo’s busiest commercial hub, Marine Drive is a 297 room hotel that is an ideal destination for both business and leisure travellers. Scheduled Completion: Q1 202 2 REALISABLE INVESTMENT S Luna Tower LKR 277mn Marine Square LKR 244mn Miriandhoo Maldives LKR 462mn Le Grand LKR 150mn Tota l LKR 1133mn Miriandhoo, Maldives 70 room luxury property on the island of Miriandhoo, situated in the silk sanded coral Baa Atoll in Maldives Marriott International together with Westin Hotels & Resorts in the Republic of Maldives manages The Westin Maldives Miriandhoo Resort since October 2018. Total Project Cost (As at 31st March 2020) : USD 50mn Expected pro fi t @30%Project ROI : USD 15mn ACAP Share of Ownership/Pro fi t : 10% Expected value of divestment : USD 1.5mn Impact to ACAP Net Book Value : LKR 277 mn Total Project Cost (As at 31st March 2020) : USD 55 Mn Expected pro fi t @30% ROI : USD 16.5mn ACAP Share of Ownership/Pro fi t : 8% Expected value of divestment : USD 1.32 mn Impact to ACAP Net Book Value : LKR 244 mn Hotel was Jointly developed with Belluna Co. Ltd, under JV ACAP Share of Ownership/Pro fi t : 8% Expected value of divestment : USD 2.5mn Impact to ACAP Net Book Value : LKR 462 mn Investments with Japanese JV’s to realise Note-1 Note-2 Note-3 Page 3 Asia Capital PLC maintains a healthy debt to asset ratio of near 50% with total liabilities of LKR 2,579mn against the total assets of LKR 5,124mn. Total liabilities of the company is approximately 35% of the Enterprise value. Net surplus assets exceeds liabilities by LKR 2,545mn, Company’s total interest bearing liabilities of LKR 1,547mn is less than 30% of the total restated assets. This manifest companies long term sustainability its ability to service debt upon restructuring and divestment of non strategic assets. Source: Quarterly Accounts 2Q2020 Assets Vs Liabilitie s Total Assets : LKR 3,666mn Unaccounted Assets: LKR 1,458mn Total Assets (Restated) : LKR 5,124m n Total Liabilities : LKR 2,579mn Total Current Liabilities : LKR 1,538mn Total Interest bearing liabilities: LKR 1,546mn Interest bearing Liabilitie s Due within 1 year: LKR 229m n Current: LKR 893m n Bank overdraft: LKR 424m n Total Interest bearing liabilities LKR1,546mn Total Assets Total Liabilities Quarterly Financial Statement 2020 of Asia Capital PLC indicates a total group liabilities of LKR 3,114mn whereas at the company level the total liabilities stands at LKR 2,579mn. Interest bearing borrowings of the group is approximately LKR 1,226mn of which LKR 426mn is due after 1 year. Company’s total interest bearing liabilities are over LKR 1,683mn of which LKR 893mn remain current. Assets Vs Liabilities Manageable Debt Page 4 Asia Capital enters into share purchase agreement to buy 70% stake of Navara Capital Partners Asia Capital to re-enter Stock Broking business soon Asia Capital PLC (ACAP) the country’s leading and pioneering investment banking house recently announced to Colombo Stock Exchange (CSE) that the company has entered into a share purchase agreement on 21st December 2020 to acquire 70% stake of Navara Capital Partners Ltd. (NCPL) Speaking on the developments in the Asia Capital PLC (ACAP) Chief Executive Officer Stefan Abeyesinhe said that upon acquisition of N C P L , A s i a C a p i t a l w i l l r e - e n t e r a n d recommence Stock Broking business at a time when capital markets in the country are performing well due to policy certainty prevailing the current economic landscape of the country. “Navara Capital Partners is currently carrying out business as an investment holding company and the company is having a 95% stake of Navara Securities. So we hope to recommence our stock broking business shortly which is part of our expansion plan” Abeyesinhe added. The disclosure to CSE highlighted that ACAP will acquire 3,536,400 ordinary voting shares representing 70% of NCPL held by Navara Capital Ltd as per the agreement entered by the parties. Source: Ada Derana Business 22 December 2020 Asia Capital to undergo restructuring to bring value to both Malaysian, Japanese investors Amidst ongoing negotiations between key Japanese and Malaysian investors of Sri Lanka’s one of the pioneering investment bank – Asia Capital PLC (ACAP), the company has recently stepped into appoint a legal and fi nancial consultant to restore con fi dence among the investors to undergo a prudent restructuring process of the group’s assets in order to create more value for investors. Further the move is anticipated to position Asia Capital group’s future direction. Accordingly, in an of fi cial letter, Asia Capital PLC has appointed Frontier Capital Partners, a fi rm headed by renowned Investment Banker Nishan Sumanadeera as the legal and fi nancial consultant to head restructuring and to restore con fi dence among foreign investors of Asia Capital PLC. “We have appointed Mr. Sumanadeera to relook at our assets portfolio and we are con fi dent that he will guide the future direction of the Asia Capital group to add value and to drive innovation to the original investments made by the foreign investors in the company,” said Executive Director of Asia Capital PLC, Stefan Abeyesinhe. Speaking on the appointment of Frontier Capital Partners, Mr. Nishan Sumanadeera went on to say that he will relook at Asia Capital’s best assets and fi nancially re-engineer them to be the key revenue generating assets to sustain the balance sheet and will make sure the foreign investor con fi dence will remain strong, robust and certain in Sri Lanka and especially in Asia Capital PLC. “As a progressive, visionary corporate entity, at Asia Capital we focus our every effort on creating exceptional value for our stakeholders, ensuring the foreign investment in Sri Lanka remain for the robust growth of our economy in these turbulent times to press ahead with con fi dence, and move into the future,” Mr. Sumanadeerras said. Source: Ada Derana Business September, 11, 2020 Asia Capital to broad base shareholding to match minimum public fl oat Leading and pioneering investment bank in Sri Lanka Asia Capital PLC (ACAP) will soon broad base its shareholding to be in compliance with public fl oating requirements stipulated by the Listing Rules of Colombo Stock Exchange. “We will soon look at opportunities of broad basing our public fl oat to match with Colombo Stock Exchange’s Rules on minimum public holding,” ACAP Chief Executive Of fi cer and Executive Director Stefan Abeyesinhe said. He further said that soon after Nishan Sumanadeera was appointed as Legal and Financial Consultant in September this year, the company had undergone initial phase of restructuring and had almost sorted all the business-related concerns with Japanese investors. Source: Daily FT November, 28, 2020 Restructuring and Diversi fi cation to drive future pro fi ts DISCLAIMER This report is for internal purpose only. The views expressed in this report are those of the authors. The expressions of opinions in this report are subject to changes without notice. Authors have based this document on information from sources they believe to be reliable but which they have not independently veri fi ed. Any recommendations contained in this report are for internal purposes and intended for general/public readers to whom it is distributed. This report is not and should not be construed as an offer or the solicitation of an offer to purchase or subscribe for any investment. This report may not be further distributed in whole or in part for any purpose. No consideration has been given to the particular investment objectives, fi nancial situation or particular needs of any recipient or reader. Copyright. Diamond Equity Research Australia (DERA) 2018, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying recording, or otherwise, without the prior written permission of the Diamond Equity Research Australia (DERA). Page 5